New Support Zones

Bulls need a solid breakout or prices will collapse back to support

   
New Support Zones

S&P 500 (SPX) — Last week, we saw the S&P 500 traverse the entire support zone of 1,210 to 1,174 in three days, and then jump to an intraday high of 1,200 on Thursday, and close at the round number on Friday.

Technically that’s an upside reversal after falling from its new high for the year to the important support at just above its 50-day moving average, and then jumping to a big round number like 1,200.

But the bears would say that the rally was preceded by “9-to-1″ volume down days with the highest volume since June.

The bulls say that the reversal up to 1,200, which is just above the 20-day moving average of the S&P 500, coupled with the big volume down day on Tuesday, was a “selling climax,” which will result in a new high.

So who is correct?

I believe that the technical situation is mildly bullish only because the last strong technical signal was Thursday’s impressive reversal. But the bulls must back this up with a solid breakout on strong breadth and high volume or prices will collapse back to support at 1,174 or lower.

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dmo chart key11 New Support Zones

If you have questions or comments for Sam Collins, please e-mail him at samailc@cox.net.


Article printed from InvestorPlace Media, http://investorplace.com/2010/11/new-support-zones/.

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